Corvex and Related Recruit Sam Zell as Ally in Takeover Battle for CommonWealth

A group of activist investors have recruited a big ally in their bid to seize control of office landlord CommonWealth REIT: Chicago real estate mogul Sam Zell.

Related Fund Management and Corvex Management LP announced Tuesday that their slate of proposed CommonWealth directors would include Mr. Zell, known for some of the biggest real estate deals over the past two decades, and one of his lieutenants, David Helfand.

The Related and Corvex group has also granted Mssrs. Zell and Helfand an option to purchase up to 4 million shares of CommonWealth REIT if they are successful in replacing the board. As of November, that would have amounted to 3.4% of the company.

CommonWealth, a real estate investment trust which owns more than 35 million square feet of office space, is currently controlled by the Portnoy family of Boston. Related and Corvex began accumulating a 9.6% stake in CommonWealth about a year ago and has asked shareholders to vote on a plan to oust the company’s board, which is headed by father and son Barry and Adam Portnoy.

Related and Corvex have criticized CommonWealth’s management structure for suffering from conflicts of interest. In an interview, Mr. Zell said that if Related and Corvex prevail, the new board would reshape Commonwealth’s governance and bylaws in the image of the many public companies that he has led in the past.

“For the last twenty-some years, I’ve been a one man band for REIT governance,” Mr. Zell said.

CommonWealth executives couldn’t be reached for comment Tuesday. In the past they have strongly disputed Related and Corvex’s contention that their management structure faces conflicts. They also have made a host of management changes in order to appease shareholders.

Last spring, shareholders voted in favor of a resolution proposed by the activist group to oust CommonWealth’s board.
An arbitration panel ruled with the existing board in November that the vote was invalid, but the panel cleared the way for a new vote.

Earlier this week, the activist group set a new record date of Feb. 18 for a new vote to replace the board.

“The shareholders of CommonWealth really haven’t had very many options.” Mr. Zell said. “What we’re doing is providing the shareholders of CommonWealth with an option.”